Association puts pressure on lenders over channel conflict
With the percentage of home loans in New Zealand written through mortgage advisers currently around 50%, the battle for market share between banks and the third-party channel is heating up.
Over the past two years, the infamous “mortgage wars” have played out across the Tasman, with Australia’s mortgage advisers experiencing increased channel conflict, as banks ramped up cashback offers to lure buyers directly.
While battles were won by the banks, brokers were the eventual winners of the war, claiming 74.1% of the mortgage market share, a new record.
With fresh calls of channel conflict ringing out across the industry, NZ mortgage advisers may be entering their own battle for market share.
The Finance and Mortgage Advisers Association of New Zealand (FAMNZ) has vowed to put pressure on lenders to provide better support to consumers who use the adviser channel after finding that, in many cases, the loan application process through an adviser takes longer than it does for a direct customer.
“We know of an instance where an adviser sent a customer to a lender directly because it was the only way an urgent application could be processed, and this is not acceptable,” said FAMNZ managing director Peter White AM.
“This shows not only a disregard for the adviser channel but a lack of understanding of how important the channel is to them, and how much business the lender can gain from working more closely with advisers.”
Advisers: Lenders treating direct and third-party customers differently
Mortgage advisers across New Zealand are increasingly frustrated by prolonged loan assessment times from banks, hampering their ability to serve clients efficiently.
Comments obtained by NZ Adviser and in Tony Alexander’s July mortgage advisers survey, with some under condition of anonymity, found advisers generally experiencing bank turnaround times ballooning out in recent weeks, with some waiting a month for an answer.
“Bank turnaround times across lending and maintenance teams for most banks are painfully slow which is making things hard,” said one unnamed adviser in the survey.
“Our biggest issue is turnaround times from lenders at the moment,” said another.
“(It’s) very apparent that the workloads in the broker units have increased as more borrowers see the value of using a mortgage broker for their finance - our channel is getting busier.”
The adviser recommended that “banks need to shift or better utilise resources that are based in the branches” to accommodate third-party growth.
White agreed, emphasising that banks were closing branches and should divert those resources into better support, systems, and technology.
However, some lenders seem to be fighting against the current.
“Channel disparity is alive and well,” said one adviser. “I guess a way to manage margin flows.”
“One bank is two days direct and two weeks otherwise, while their CEOs are not in touch with third-party channels.”
Full applications and assessments slowing turnaround times
While some advisers pointed out the channel favouritism, others suggested other reasons for why banks might be slow on turnaround times.
Eugene Bartsaikin (pictured above right), an award-winning mortgage adviser from Twine Financial Advisers, stressed that current turnaround times depend on the lender. However, he has found some lenders’ turnaround times are over 10 working days.'
She was also awarded for the Best Mortgage Brokers in New Zealand. Read all the winners here.
“For context, prior to this recent blow-out in turnaround times, we were looking at around a five-working day turnaround, which seemed like a sweet-spot.”
One of Bartsaikin’s applications that had taken 14 working days to process was for a transaction where the client had a finance condition.
“Fortunately, the client had another extension, and the approval came through only a few hours before the second deadline. Not everyone has been this lucky,” Bartsaikin said.
One major part of the problem is that often small requests currently require a full application and an assessment, according to Bartsaikin.
“We had a client request a $5,000 top-up to pay for some insulation as they are entitled under the low interest promotion by that lender – this client had more than enough equity and all their income credited to that bank and yet a full assessment was required,” he said.
“Another example, we had a client who had some savings set aside and we suggested setting up a small revolving credit to help them save interest without losing access to that money and that too required an application.”
A different adviser who talked to NZ Adviser said one bank was “manually checking spending line-for-line on discretionary expenses and challenging what is disclosed”.
“This is causing delays unnecessarily for clients where it is clear they will/can cut back and budgets will change as homeowners,” the adviser said.
This comes despite recent regulatory changes to the CCCFA removing prescriptive lending requirements, which potentially should have streamlined banking processes by allowing them more discretion.
The adviser recommended banks should “stop delving so deeply into expenses for discretionary spending”, as it’s no longer a legislation requirement.
“They are living in the past.”
NZ mortgage advisers urged to call out shady lender practices
While similarities exist between Australian and NZ mortgage brokers and their fight for market share against lenders, the reality on the ground is that the industries have their differences.
White – also the current chair of the International Mortgage Broker Federation of which New Zealand is now represented by FAMNZ – said New Zealand lenders must catch up to the rest of the world when it comes to technology.
“Our processes are far more manual than in other similar nations, and this is impacting client outcomes,” White said.
He said the association had already discussed these matters with the Commerce Commission.
“Kiwi finance and mortgage advisers deserve better and customers deserve better, but unfortunately advisers have had such poor representation for many years,” he said.
White vowed that FAMNZ would not allow this trend to continue and called on input from advisers.
“I encourage advisers to contact us with your experiences, particularly around poor service from lenders, so we can take up these issues,” he said.
